Mortgage Forgiveness Debt Relief Act of 2007Ronn Tockman CPA
January 7, 2008 — 1,915 views
The National Conference of CPA Practitioners (NCCPAP), a national professional CPA association, presents the following legislative update on items of importance to CPA practitioners and the general public:
On December 18, 2007, the House of Representatives approved a bill passed by the Senate entitled "Mortgage Forgiveness Debt Relief Act of 2007," clearing it for the President's signature. On December 20, 2007, the President signed this legislation.
The main thrust of the Act is to provide relief from taxable income arising from indebtedness discharge on foreclosed mortgages between January 1, 2007 and January 1, 2010 on the taxpayer's principal residence. Property owners who had a foreclosure will not have to recognize taxable income on the amount of forgiven debt, up to $2,000,000, in the foreclosure sale of their primary residence if the sale date falls between January 1, 2007 and January 1, 2010.
Included in the Act is a significant provision proposed by NCCPAP that the organization has been lobbying on for several years and is pleased to see finally come to fruition. NCCPAP introduced this concept to Congress five years ago and has continued to advocate for its enactment into tax law.
A surviving spouse will now have the ability to exclude up to $500,000 of gain on the sale of principal residence sold after December 31, 2007, if the sale occurs not later than 2 years after the spouse's death, provided the exclusion qualifications under IRC section 121 were met prior to the spouse's death. This would allow the surviving spouse to maintain the same tax benefit had his/her spouse not died and provide sufficient time to arrange his/her affairs.
Previously, the surviving spouse would be required to sell the home in the year of death to take advantage of the full $500,000 exclusion, and after
12/31 of the year of death, the survivor could only exclude $250,000. For families coping with the loss of a loved one, losing such a large exclusion placed an unfair and unfeeling financial burden. NCCPAP is proud to have taken a leadership role in this correction.
On another point, HR 4318 has been introduced by Representatives Crowley
(D-NY) and Ramsted (R-MI). The bill would reinstate the "substantial authority" level of responsibility replacing the "more likely than not"
position of the Small Business Act of 2007. This bill would equalize the tax reporting standard for taxpayers and return preparers. NCCPAP fully endorses this bill and recommends that all taxpayers and preparers contact their Representatives and Senators urging support of this measure.
The National Conference of CPA Practitioners (NCCPAP) is an organization of CPAs working only in public practice. The national office is located in Mineola, New York, with active chapters in Nassau/Suffolk, Eastern Long Island, Westchester/Rockland, Northern New Jersey, Houston, Texas and Boston, Massachusetts and members at large nationwide. For additional information on the legislation, contact Ronn Tockman, CPA, at [email protected] or 781-341-2400. For more information on NCCPAP, visit www.nccpap.org.